The Csop is the most flexible and popular of the three types of approved share plans in the UK.

Many companies cannot use the alternatives – share incentive plans (Sips) or sharesave – because these can be costly and cumbersome to administer, and contain too many detailed provisions, including a requirement to make offers to all employees on the same terms. Only the smallest companies can offer enterprise management incentive (EMI) options, and then these are not permitted for certain excluded activities.

The reasons for Csop’s decline in popularity over the last 10-15 years have been largely the same as the reasons why share options have been used less often, mainly a combination of the introduction of an accounting expense for share options (where previously share awards incurred an accounting expense, but market-value share options did not) and falling share prices. The freezing of the limit at £30,000 has made Csops less relevant to many companies.

In my view, no further tax incentives are necessary to encourage companies to extend share participation to top executives in the biggest companies. They do this already (some would argue excessively). However, it is important to provide greater motivation for middle- and lower-ranked employees in all companies, and senior executives in small- and medium-sized companies, which do not qualify for EMI. Csop is ideal for this.

If the government genuinely wants to extend employee ownership (as suggested by its enthusiastic response to the Nuttall report), the answer should be to make the Csop even more flexible. In particular, two advantages of EMI could be extended to the Csop, allowing options to be granted at a discount or at nil cost (but only giving income tax relief for share price increases over the market value at grant) and allowing tax-relieved exercises immediately after the grant date.

The latter would also mean that the early exercise provisions, for leavers and company events, would not need to be included in the tax legislation. This would be consistent with the general movement in market practice away from share options and towards share awards.

Given the government’s current budgetary constraints, I do not think there is any need to increase the £30,000 limit at this stage. However, it could be simplified to £10,000 per year or £30,000 for grants over any rolling three-year period.